S3 revenues grow 100 per cent

One-time 3D graphics company S3 saw its Q3 revenue double year-on-year, though its losses ballooned over the same timeframe.

For the three months to 30 September, S3's third quarter of fiscal 2000, the company saw revenues reach $140 million, almost twice the $70.5 million Q3 1999, driven by sales of its Rio MP3 player. Clearly S3's attempt to take Diamond Multimedia's business - which it acquired in this period last year - and make it its own is working.

"We have made the difficult decisions that will enable us to focus our efforts toward our high-growth emerging businesses and leadership technologies," said Ken Potashner, S3's chairman and CEO.

Well, almost. S3 lost $37.5 million during the quarter, dragged down by the decision to shut the company's multimedia add-in card business down and losses at its RioPort online music portal and software operation. Factor in one-off charges, and S3's loss hits $75.6 million, or 82 cents a share. That compares poorly with Q3 1999's loss of just over $11 million (40 cents a share).

There should be better news on the horizon, primarily through S3's sale of its 3D chip business to Taiwan's VIA. Although passed by US mergers and acquisitions regulators, the Taiwanese government has been less than keen on the deal, initially blocking its progress. The sale was to have been completed last July. Negotiations continued through August, resulting in the basis of a deal that Taiwan's regulators could live with.

The deal should net S3 $288 million. In the meantime, Rio continues to sell well, having become probably the most recognised brand in the category. How it will compete once the big-name audio brands move in on the territory remains to be seen. Sony is there already, but its products are at the very top end of the price-range. Others will provide tougher competition, but Rio has had plenty of time to establish itself. ®